Cable industry sharks are circling Time Warner Cable, the second largest cable TV company in the United States, which has become the subject of intense speculation that it might be purchased by one of its rivals. The latest scuttlebutt suggests that Comcast, the nation’s largest cable company, might pursue a joint bid for Time Warner Cable with Charter Communications, with plans to break it up. That news follows reports that Comcast is exploring the regulatory hurdles associated with buying Time Warner Cable outright, which sent the company’s shares soaring by 10% on Friday.

Such a merger would be intensely scrutinized by the U.S. government, including the Justice Dept., which would address antitrust concerns, and the Federal Communications Commission, which would be charged with ensuring that the deal serves the public interest. Combining the number one and number two cable companies in the country would create a corporate behemoth with approximately 33 million customers. Comcast already owns NBCUniversal, one of the crown jewels of the media industry, after buying the company from industrial conglomerate General Electric in a highly controversial deal.

“We expect a Comcast-TWC deal would draw intense antitrust/regulatory scrutiny and likely resistance, stoked by raw political pushback from cable critics and possibly rivals who would argue it’s simply a ‘bridge (deal) too far’ or ‘unthinkable,'” Stifel telecom analysts Christopher C. King and David Kaut wrote in a recent note to clients. “We believe government approval would be possible, but it would be costly, with serious risk. This would be a brawl.”

Harold Feld, senior vice president of Public Knowledge, a D.C.-based digital rights group, says that a Comcast merger with Time Warner Cable ought to be “unthinkable,” because it would result in the nation’s largest broadband and media company becoming even bigger. Comcast is already the dominant cable company in cities across the country, including Chicago, Boston, Philadelphia, Detroit, Houston, and Denver. “Comcast is already super huge in terms of its market power in every single area of telecommunications and media,” said Feld. “It would be very difficult to argue a public interest benefit.”

From an industry perspective, Time Warner Cable is an attractive takeover target due to its major presence in several important markets, including New York, Los Angeles, and Dallas, as well as large swaths of Ohio, North Carolina and Maine. For months, Liberty Media, the broadband giant led by billionaire mogul John Malone, has made no secret of its interest in buying Time Warner Cable, but thus far its efforts have been spurned. Malone’s new tactic appears to involve a bid by Charter — a smaller cable company — which is said to be lining up financing for a deal.

Liberty Media owns a 27% stake in Charter. A joint Comcast-Charter bid for Time Warner Cable could help ameliorate regulatory concerns because the company’s cable systems would be divided by the buyers. Comcast would gain new subscribers in New York and Los Angeles, and potentially avoid the regulatory headaches associated with an outright takeover. Charter would gain new business in Ohio, North Carolina and Maine, and also receive important financial backing in its quest to buy a much larger rival.

Time Warner Cable is reportedly leery of Malone, and favors a tie-up with Comcast, and from a business perspective such a deal would have substantial benefits. In particular, the combined company would have increased leverage in contentious negotiations with the TV broadcasters over “retransmission consent fees,” which the cable and satellite companies must pay for the right to carry popular programming like prime-time shows and sports. These fees were at the heart of a recent dispute between CBS and Time Warner Cable that led to an unprecedented, monthlong CBS blackout for more than 3 million Time Warner Cable subscribers in New York City, Los Angeles and Dallas.

According to Stifel’s King and Kaut, “the synergies would certainly be significant (programming costs, corporate overhead, increased scale for equipment purchases, etc).” On a recent Wall Street conference call, both outgoing Time Warner Cable chief executive Glenn Britt and incoming CEO Rob Marcus refused to rule out a merger with another cable company, but said that any deal must be in the best interest of shareholders. “Any decision on consolidation hinges on just one question, does it maximize value for our shareholders?” Marcus said. (Time Warner Cable was spun off from TIME parent Time Warner in 2009.)

Navigating the regulatory hurdles would be a complex undertaking for Comcast, but the company indicated a willingness to do so when it purchased NBCUniversal, a deal that was subject to numerous conditions imposed by the Justice Dept. As it mulls a bid for Time Warner Cable, Comcast does have a few legal precedents working in its favor. The D.C. Circuit Court of Appeals has twice thrown out a FCC cap limiting cable ownership to 30% of the pay-TV market — the most recent decision was in 2009. A combined Comcast and Time Warner Cable would have about 33% of the market nationwide.

“Comcast and TWC could argue that their merger would not be intrinsically different from the Comcast-NBCU combination that was approved by the DOJ and FCC with numerous conditions in 2011,” Stifel’s King and Kaut wrote. “Comcast-TWC would essentially be extending Comcast-NBCU vertical integration of distribution and content to the TWC markets.” That deal was intensely opposed by public interest groups and media reform advocates.

In her recent book, Captive Audience: The Telecom Industry and Monopoly in the New Gilded Age, Susan Crawford, a tech policy expert and professor at Cardozo Law School, argued that the Comcast’s purchase of NBC Universal created a massive conflict of interest by combining a major content creation company with a broadband giant in control of a vast content distribution network. Indeed, a Comcast merger with Time Warner Cable would be less about cable TV, and more about assembling an even larger broadband Internet juggernaut, as severalobservers have pointed out.

Needless to say, such a pairing could face an uphill battle in Washington, D.C. “Our sense is the DOJ and FCC would have concerns about the market fallout of expanded cable concentration and vertical integration, in a broadband world where cable appears to have the upper hand over wireline telcos in most of the country (i.e., outside of the Verizon FiOS and other fiber-fed areas),” Stifel’s King and Kaut wrote. “We suspect the government would raise objections about the potential for Comcast-TWC bullying of competitors and suppliers, given the extent and linkages of their cable/broadband distribution, programming control, and broadcast ownership.”